State Consumer Disputes Redressal Commission
M/S Sks Ispat & Power Ltd., vs New India Assurance Insurance Co.Ltd., on 31 March, 2012
CHHATTISGARH STATE
CONSUMER DISPUTES REDRESSAL COMMISSION
PANDRI, RAIPUR
Complaint Case No. 10/2010
Instituted on 02.09.10
M/s SKS ISPAT & Power Ltd.
Through: Vice President & Authorized Signatory,
Situated at Industrial Growth Centre, Siltara,
RAIPUR (C.G.) ... Complainant.
Vs.
New India Assurance Insurance Co.Ltd.
Through: Division Manager,
Division Office No.1, Madina Manjil,
Kutchery Chowk, Jail Road,
RAIPUR (C.G.) ... Opposite Party.
PRESENT: -
HON'BLE JUSTICE SHRI S.C. VYAS, PRESIDENT
HON'BLE SHRI V.K. PATIL, MEMBER
COUNSELS FOR THE PARTIES: -
Shri Sudipta Gupta, for complainant.
Shri Shishir Bhandarkar, for OP.
ORDER
Dated:31/03/2012 PER: - HON'BLE JUSTICE SHRI S. C. VYAS, PRESIDENT This is a complaint for seeking compensation of Rs.93,88,552/- along with interest @ 12% p.a. and also cost of litigation from the OP insurance company on the ground that insured sponge iron fines was damaged in an incident of inundation and the insurance company committed deficiency in service in not paying compensation for loss to the insured article.
2. The complaint in brief is that the complainant is an Iron and Power Company having its plant at Industrial Growth Centre, Siltara, // 2 // Raipur and insurance policy under Standard Fire and Special Perils Policy covering risk from 14.04.09 to 13.04.2010 for sum assured Rs.14,00,00,000/- was purchased by it from the OP in respect of storage of coal and sponge iron at Factory premises and storage of stores and spares at Factory including chemicals and fuels. On 14.08.09, there was heavy rains from morning and due to which the drain water entered into the SMS shed where sponge iron fines were stored. On account of heavy rains, the main drain was heavily flooded and as a result water was overflowing and after entering in the SMS shed, inundated the sponge iron fines stored therein. The subsequent chemical reaction of the submerged sponge iron fines with water converted the sponge iron fines into magnetite which was of no use to the complainant and it was to suffer loss to the tune of Rs.91,88,552/-. The incident was reported to the insurance company and the insurance company appointed a surveyor for conducting survey. Mr. K.C. Mohapatra was appointed as surveyor by the insurance company, who came to the Plant of the complainant on 22.08.09 and 03.09.09 and inspected the Site of SMS shed. He made an investigation and details of loss were discussed by him with the complainant who fully cooperated with him and provided all necessary documents to the surveyor. The surveyor had submitted his report to the insurance company in the month of December 2009 and thereafter the complainant was continuously making requests to the OP / insurance // 3 // company for payment of loss against the claim lodged by him, but the insurance company was not giving any response to the requests and then notice was issued by the complainant through its advocate, but even then no response was given by the OP / insurance company and the claim is still pending for settlement with the insurance company. Feeling aggrieved by that, the present complaint has been filed for seeking directions to the OP to pay the amount of damages to the complainant.
3. The OP insurance company in the written version took this preliminary objection that the complainant is a company incorporated under the Company's Act 1956 and as such does not come in the category of 'consumer' as defined under Consumer Protection Act 1986, so the complaint is not maintainable. It has also been objected that Vice President of the complainant Company has filed the complaint, who has no right to file such complaint and in para-wise reply the fact of issuance of policy has been admitted, but it has been stated that the observation of terms and conditions of the policy were condition precedent for claiming any benefit thereunder. This fact has also been denied that on 14.08.09 it was raining heavily from the morning and because of that the main drain overflowed causing the water entered into SMS shed and inundated the sponge iron fines. It has also been denied that the complainant suffered loss to the tune of // 4 // Rs.91,88,552/- on account of alleged inundation. It has been contended that Mr. G. C. Agrawal, surveyor was appointed by the insurance company immediately after receipt of information about the incident of alleged inundation, who conducted preliminary survey of the insured factory premises and in his report dated 21.08.09, it was noted by him that damaged sponge iron was stored in extended SMS shed for the purpose of loading. The store was open from all side with only the roof to cover the material underneath it. Height of the roof was around 25 feet, which meant that in case of heavy rain, water or water vapors could have easily entered and affected the material. Water was completely removed and the sponge iron was found in hot and discoloured condition. There was drain line adjacent to storage space. He also noticed presence of huge quantity of foreign material in the heap of sponge, like conveyor belt, stone and others and the insured was unable to satisfy him why the foreign particles were present in 'A' grade sponge iron. Insured was unable to reply why the material was stored in open in rainy season; especially when they knew that sponge iron is highly sensitive to water. It has been remarked by him that the damage due to rainwater was not covered under the fire policy and there was no proof that the material was fresh sponge iron. On receipt of preliminary survey report, Mr. K.C. Mohapatra was appointed for conducting final assessment of loss, who submitted his report, which was having many discrepancies in // 5 // comparison with the preliminary report of Shri G.C. Agrawal. Insurance company noted these discrepancies and sought clarification from the surveyor but the clarification of the surveyor was not quite convincing as he could not rule out that the heap was actually the dump of waste material. As a result of this the OP again sought some more clarification and final comments from Shri K.C. Mohapatra to proceed further, but the surveyor could not finally reply to the queries. The insurance company was having right to dispute the correctness of surveyor's report under provisions of section 64 UM of the Insurance Act and therefore after thorough consideration of report of Mr. G.C. Agrawal as well as that of Mr. K.C. Mohapara, the company came to the conclusion that there was not much rainfall on the material dates to cause any flooding or inundation on the spot and the loss on account of rain water was not covered under the policy. Thus, on the basis of this conclusion the company has repudiated the claim as "No Claim"
vide letter dated 28.02.2011. In this way liability of the insurance company has been totally denied.
4. We have heard arguments advanced by both parties and have very minutely gone through the record of the case.
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5. First question for consideration is whether the complaint which has been filed on behalf of a Company, by its Vice President, is maintainable ?
6. We have considered the arguments advanced by both parties in this regard and we are of the considered opinion that the complaint in the present form is very well maintainable before us. The reason is that under Section 2(1)(m) of the Consumer Protection Act 1986 (hereinafter referred as "Act"), where "person" has been defined in the terms that the "person" includes,-
"(i) a firm whether registered or not;
(ii) a Hindu undivided family;
(iii) a co-operative society;
(iv) every other association of persons whether
registered under the Societies Registration
Act 1860 (21 of 1860) or not;"
Thus, it appears that the definition of 'persons', under Section 2 (1)(m) of the Act is having a very wide meaning and includes a Firm, whether registered or not and other association of persons whether registered or not. A Company is also a Firm and association of persons duly registered, who share profits of the Company including the Directors and Shareholders. So, the complainant Company is an association of persons and which has been duly registered under provisions of Company's Act. Thus, the Company comes in the category of a 'person' as defined under the Act and as per the // 7 // definition of 'consumer' under Section 2 (1) (d) of the Act, a 'consumer' means any person who buys any goods for a consideration or hires or avails any services for consideration, so if a Company hires or avails any services for consideration then it can very well be said to be 'consumer' of the respondent insurance company and indisputably, insurance service of the OP insurance company has been hired by the complainant Company and so the complaint filed by the Company is very well maintainable.
7. It has also been contended by learned counsel for the OP insurance company that Vice President of the complainant Company was not competent to file complaint on behalf of the complainant. This objection does not carry much force in the light of resolution of the Company dated 26.11.10, copy of which has been filed, whereby including the Vice President (Commercial) some other persons like Chairman, Managing Director and others have been severally empowered to file and sign all papers, application and plaints etc. on behalf of the Company. It is true that the complaint has been filed on 02.09.2010 and the resolution has been passed on a subsequent date, but it hardly matters, in view of the fact that on the date of filing of the complaint also, Mr. P.V.S. Chandrashekharam was Vice President (Commercial) of the Company and was one of the Authorized Signatory of the Company on the basis of earlier resolution dated // 8 // 07.05.10, so we do not find much substance in this objection of the insurance company that the complainant is not a 'consumer' of the OP and that the complaint has not been signed and filed by a proper person.
8. Next question for consideration is as to whether the complainant has suffered loss and whether it was on account of inundation of sponge iron fines storaged in factory premises at SMS shed ?
9. In this regard, affidavit of Mr. Chandrashekharam is there in support of the contention of the complaint. He has stated that on 14.08.09, it was heavily raining from morning and due to this cause water from the drain entered into the shed and penetrated into the sponge iron heap. In subsequent affidavit he elaborated the incident by saying that on 14.08.09 the weather was cloudy and there was occasional rains since morning. The intensity of rain increased substantially and by 1:30 pm it was raining heavily thereafter. By 2:30 pm the main drain was heavily flooded and the water was overflowing the drain and entered the SMS shed, where the sponge iron fines were stored. The flooding continued for 8 long hours as a result of which the sponge iron fines were submerged. It has also been stated by him that after the water subsided the entire sponge iron was collected and then // 9 // tested which revealed that they were converted into magnetite, which was of no use to the Company. Apart from this statement of the Vice President of the complainant Company, intimation of the incident given to the insurance company Annexure A-2 and intimation given by Mr. Deepak Mehta (SID) of the Company to the Vice President (Commercial), Annexure A-3, on the date of incident itself, are also there on record. In the first information which was given by Deepak Mehta, General Manager of the Company, to the Vice President (Commercial) i.e. Annexure A-3, it has been mentioned that around 1000 MT of prime DRI having 88% mtz. was kept under extended SMS shed as being done in normal practice for dispatch of same by the magnet crane. It has further been stated that on 14.08.09, due to heavy rain all areas were flooded with water resulting in water entering into the shed and deteriorating the DRI quality by reoxidation of total material. Therefore, the Vice President was requested to inspect the wet DRI for necessary claim and then the Vice President sent intimation to the insurance company in the form Annexure A-2 in which also same facts have been reiterated. It has also been stated that the facts were intimated to the Office of the insurance company on the same day telephonically also. Then request was made to send a surveyor for conducting survey.
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10. The insurance company has not brought on record statement of anyone to counter the facts stated in the affidavit of the Vice President of the Company Mr. P.V.S. Chandrashekharam and Deepak Mehta and their statement remained un-contradicted. Mr. G. C. Agrawal, surveyor and loss assessor was instructed by the insurance company after three days on 17.08.09 for conducting survey and then he visited the spot on the same day on 17.08.09 and submitted his report dated 21.08.09, Annexure OP-2 to the insurance company. In this report under the head Happening it has been mentioned that "as reported by the insured that on dated 14/08/2009 due to heavy rain whole area was flooded resulting water entered in the shed where sponge iron was stored for the purpose of dispatch". He has also recorded his Survey Findings and has observed that "the damaged sponge iron was stored in extended SMS shed for the purpose of loading". It has also been observed by him that the store was open from all side, only the roof was covered. It was having height of around 25 feet and then he depicted this conclusion that in case of heavy rain water / water vapors can easily enter inside and affect the material. It has also been noted by him that there was drain line adjacent to storage space, as per the insured this drain line was overflowing and the water entered inside the sponge iron. He has also noted that he found the sponge iron in hot condition and when asked it was told by the insured that due to chemical reaction, water evaporated and the sponge iron // 11 // discolored and due to water the sponge iron converted into iron ore. It has also been submitted by him in very specific words that he tested the heap at different locations by hand magnet and confirmed that the material shown to him was sponge iron, though there was huge quantity of foreign material found inside the heap of sponge, like conveyor belt, stones and others and when asked the insured was unable to satisfy that why the foreign particles were present in A grade sponge iron and also why in rainy season it was stored in open. He made remarks that rain water damage is not covered under the policy and that the insured is required to prove that the material shown was fresh sponge iron and in that case why foreign particles were present in such a huge quantity and also to reply as to why such a huge quantity was stored in open.
11. The insurance company has made this report of Mr. G.C. Agrawal basis of repudiation of claim of the insured and also of disbelieving the findings recorded by another surveyor Mr. Mohapatra. However, we find that Mr. G. C. Agrawal surveyor has also confirmed in his report that the material which was stored in shed having roof was sponge iron though it was having some impurities. He has confirmed that there was drain near the place where sponge iron was stored in a shed, for the purpose of dispatch and it was informed to him that drain was overflowing at the time of incident // 12 // resulting in water entered into stored sponge iron. This water after chemical reaction converted the sponge iron to magnetite, which was a useless substance.
12. Mr. G.C. Agrawal, has raised certain queries in his report, one regarding presence of foreign material and second regarding storage of sponge iron in a rainy season in open place. Complainant insured has stated that the material was to be dispatched to the buyers and so as per normal practice it was stored there under roof. It was an Iron and Power Company and a huge quantity of product of sponge iron was to be stored there, therefore, there was a big shed having height of roof of around 25 fts, which appears to be a normal thing in case of a big business concern. However, it appears that the final surveyor Mr. Mohapatra has also taken note of this fact and has clearly mentioned in his report that as the sponge iron was containing some impurity and foreign material, therefore the quantity for the purpose of determining damages of sponge iron was reduced by him by 50%, which appears justified in the facts of the present case. He has also in very specific words in his report Annexure OP-3 has stated in respect of activity and process of the factory that among all other activities, the insured is engaged in manufacturing of sponge iron. In this process iron ore is reduced in a kiln with coal and insufficient supply of oxygen. In this way oxygen present in the ore reacts with coal and forms carbon // 13 // dioxide and escapes out leaving sponge iron in the Kiln. It has been noted by him that the sponge iron is not iron at all but a processed ore which may be directly charged to Blast furnace to produce iron. Thus, it is clear that sponge iron was a processed ore and was in huge quantity. From the diagram which has been made in the survey report of Mr. Mohapatra under the head "Location and Construction", it is clear that the SMS shed was measuring 40 mtrs X 20 mtrs. with GCI sheet roof over steel girders and truss. There was no walls made in the shed and there exists a 3 ft. wide drain on South side of the shed through which rain water of the plant is allowed to pass. The factory is located in Industrial Growth Centre, Phase II, Siltara, Raipur. The location map which has been drawn by the surveyor shows that new SMS shed, where the sponge iron was stored was in the East South corner of the premises and the drain from which water was to flow was just adjacent towards two sides of the shed. It was adjacent to the SMS shed from the East side also. It has also been noted by the surveyor under the head "the Incident" that after having discussion with Vice President (Commercial) and General Manager (Sponge Iron) the sequence of events transpired to him that on 14th of August 2009 was a rainy day at Raipur. It was raining from the morning. By 1:30 pm it was raining heavily. By 2:30 pm the main drain passing through the new SMS shed was heavily flooded. Water was overflowing the drain and entering into the new SMS shed. It entered into the sponge // 14 // iron heap in the SMS shed. There was sponge iron of zero size stored in the shed ready to be dispatched to the customer. Water from the drain entered into the shed and penetrated into the sponge iron heap. The area became hot although rain was continuing out side. Then Mr. Mehta was informed who came to the spot only see that drain water was entering into the sponge iron heap and reacting. Nothing could be done to stop water penetration because of the rain. The situation continued for more than 8 hours and after water receded into the drain, he collected samples, tested and found that the sponge iron had been converted to magnetite. Then the incident was reported to the Superiors. Mr. Mohapatra took pains of mentioning formula of chemical reaction of sponge iron with water and on the basis of scientific chemical tests and metallurgical tests, results were drawn by him. As the heap was in uneven shape therefore for the purpose of quantification he requested for making arrangements for making the heap in trapezium shape and then measurements were taken physically and after calculation it was found that weight of the sponge iron was 776.06 MTs. He has also noted that the heaps actually have foreign material mixed in it. It has also been noted by him that there was possibility that rain water might have ingressed into the heap from 2 sides and not from 4 sides since the heaps were in a corner. It has also been noted that simultaneously, because of the proximate location of the drain, inundated water must have entered into the // 15 // heaps, so he opined that loss could occur due to rain water and due to inundated water both. In addition to it presence of foreign material was also to be considered and therefore the calculation of actual loss quantity was done in the following manner : -
i. Total quantity available in the heap : 776.06 MT ii. Less quantity of foreign materials 50% : 388.03 MT : 388.03 MT iii. Less : less loss quantity due to rain water 25% : 97.00 Gross quantity loss due to inundated water : 291.03 MT Here we find that the surveyor at the place of deducting 25% of the total quantity has merely deducted 25% of the 50% of total available quantity in the heap on account of loss due to rain water. When it was found by the surveyor that quantity of foreign material was 50% and there was loss due to rain water, which was entering into the heap from two sides and also due to inundation from the lower portion to the heap, then the proper calculation should have been that the quantity of foreign material 50% should have been deducted and then at the same time 25% of the total quantity available in the heap should have been considered on account of loss due to rain water. Thus, the entire quantity of loss to the sponge iron available in the heap should be calculated as affected by the inundated water to the tune only 25% and not to the tune of 75% of the remaining material. Here we find some mistake committed by Mr. Mohapatra, which might have raised questions and confusions in the mind of the insurer.
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13. The insurance company has sent letter Annexure OP-4 to the surveyor Mr. K.C. Mohapatra, seeking some clarification. It has been stated in the letter that as per the weather report rain started at 01:30 p.m. on the date of loss dated 14.08.09 and it was light and intermittent rain. The amount of rain was so scantly that it was only 18.9 mms for 24 hours till as 8:30 hours on 15.08.09. Logically such small amount of rain could not result into heavy flooding or inundation, considering the topography of the area and a deep and 3 feet wide drain alongside. The surveyor in reply Annexure OP-5 has given explanation that weather report for 14.08.09 stated intermittent rain at Raipur and not at Siltara which is 23 KMs away and he has specifically stated that the surveyor interviewed more than 11 persons both employees and contract labours, who confirmed that there was very heavy rain on 14.08.09.
14. It has also been stated by him that topography of the area is that the drain under reference is connected to a natural Nala located 300 mtrs away, hence the water collected in the catchment-area passed through the natural Nala and entered into the factory causing heavy inundation. He has also in reply to the another query made by the insurance company has clarified that the loss was also on account of rain water from two sides, which affected the heap and it was found // 17 // by him that as the shed was having roof over it, therefore the heap could only come in contact with rain water from two sides. He has inspected the loss not only from sides, but also from the bottom and the middle portion of the heap and it has been noted by him that had the heap been damaged only due to rain water, only the two sides would have been affected.
15. The insurance company has also asked him that the spot surveyor had raised some pertinent queries which have been ignored by Mr. Mohapatra and those queries were also mentioned in the letter. In reply of which Mr. Mohapatra has specifically stated that he has never ignored preliminary surveyor's questions and the same queries were put by him the insured and they reply that the sponge iron fines was kept in the shed to be dispatched to a customer. The consignment could not be dispatched due to the rain. So far as presence of foreign materials is concerned he has confirmed that he also observed dust and dirt in the sponge iron heap and therefore conducted experiment, drew random samplers and magnetically segregated them to find out percentage of dust and dirt and his experiment showed that 50% of the heap was dust and dirt and 25% of the rest was damaged due to rain water and therefore he calculated the loss deducting these figures into account after having rounds of discussion with the insured and that is how the loss was reduced by 76.92%. It has also been stated by him // 18 // that calculation and quantification have a sound mathematical base downloaded from I-Net and an appropriate procedure was followed by him in this regard.
16. We are fully satisfied with the answers given by the surveyor to the insurance company and find that the insurance company was unnecessarily delaying the settlement of claim. It is true that sponge iron which was stored by the complainant Company at the SMS shed was also damaged due to rain water and also due to inundated water and it is also true that the heap was containing foreign material. In this way this question is decided.
17. Lastly it is to be considered as to what amount is payable by the insurer to the insured under the terms of the policy as compensation for losses suffered by it ?
18. Mr. Mohapatra in his report has calculated the gross loss as Rs.32,84,564.00 and after reducing value of salvage and reducing further amount on account of under insurance and policy excess, the net liability was calculated at Rs.21,21,516.00. This calculation has been made on the basis that loss on account of rain water was 25% of the remaining quantity after deducting 50% of the total quantity on account of presence of foreign material, whereas we find that as it was // 19 // heavily raining and the rain water entered in the heap from two sides and therefore reasonably it can be concluded that the damage due to rain water was 50% of the remaining quantity or 25 % of the total quantity. Thus, reasonably it appears that total quantity available in the heap of sponge iron be reduced by 75% as it was containing foreign material and was also damaged due to direct rain, which was not the insured peril in the policy and 25% of the total available quantity was damaged on account of inundation and therefore we find that the loss which has been assessed by the surveyor is to be reduced to 50% of the total amount as quantified by the surveyor. Thus, it appears that gross loss which has been calculated by the surveyor as Rs.32,84,564.00 comes out to Rs.16,42,282.00 from which 5 % salvage Rs.82,114.10 is to be deducted and therefore the assessed loss comes out to Rs.15,60,167.90. Applying the under insurance, the loss reduces to 72.99% of the assessed amount which comes out to Rs.11,38,766.55 and from which the policy excess 5%, is further reduced then net liability of the insurance company comes out to Rs.10,81,828.22 i.e. Rs.10,81,828/-.
19. Therefore, the OP insurance company is directed to pay this amount Rs.10,81,828/- along with interest @ 9% p.a. from the date of filing of the complaint till date of payment to the complainant. Cost of litigation is quantified as Rs.5,000/- and the insurance company is // 20 // directed to pay this amount also to the complainant. With this direction the complaint is disposed of.
(Justice S.C.Vyas) (V.K. Patil)
President Member
/03/2012 /03/2012